The HD Wars Are Over. What’s the Next Battleground?

After Rush to Add High-Def Channels, Operators Focus on New Fronts

By Todd Spangler -- Multichannel News, 7/11/2011 12:01:00 AM

Four years ago, DirecTV fired the missile that launched a high-definition arms race among pay TV providers.

At the 2007 Consumer Electronics Show, the satellite operator declared it would offer 100 national channels by the end of the year — at a time when many operators didn’t have enough capacity to offer more than 50.

Now, the smoke has cleared. The panic has subsided among cable operators, which have come within shouting distance of the HD marketing claims of DirecTV and Dish Network, at least in most major markets.

‘OVERALL EXPERIENCE’

For DirecTV, the HD “bigger is better” battle is over. “To be honest, I think right now, everyone’s got most of the important stuff in HD,” Derek Chang, DirecTV executive vice president of content strategy and development, said. “Once we got to 100 channels, it became about delivering the overall experience.”

There’s less benefit in trying to hit 200 HDs because those by their nature will be less-watched networks, he noted. DirecTV is going to continue to add channels “selectively as we see fit and where we can deliver value to the customer,” Chang said. The satellite operator is advancing along several new fronts, including 1080p HD (Blu-ray Disc quality), early-premiere movies, sports, iPad apps, multiroom viewing and enhancing the guide.

“HD is just one piece of the puzzle,” Chang said.

Comcast now offers 150 HD channels in Philadelphia, and can “do that as necessary in any given market,” senior vice president and general manager of video services Marcien Jenckes said. He credits the MSO’s multiyear Project Calvary analog-reclamation project for clearing room for HD.

The cable operator, as has been its strategy to counter the HD channel-count marketing for the past several years, is emphasizing its video-on-demand heft. In Xfinity markets, Comcast now offers about 6,000 HD VOD selections, out of 25,000 overall.

“Where there’s a war going on now, it’s an on-demand war,” Jenckes said. “More than anything, consumers are telling us they want choice.”

That said, he acknowledged cable “may have underestimated the adoption curve around HD out of the gate … Today, we have more than covered our position on that front and we can actually very aggressively compete on that front.”

It turns out, there was very little switching from cable TV to satellite because of HD channel counts, according to Leichtman Research Group president Bruce Leichtman. In fact, DirecTV’s bigger target in touting a triple-digit HD offering was Dish.

“Now we’re at parity,” with perhaps the exception of some rural areas, he said. “But there’s never been a magic number — there’s no difference in consumer perceptions of 50 or 150 HDs. It’s just a feeling of ‘a lot,’ and the question of, ‘Are there core channels in HD that I am missing?’ ”

Most cable customers are not missing a lot now, Leichtman said, and for all the hand-wringing, satellite’s HD lead never became a serious issue. “The cable guys made it more of a concern than it was,” he said.

For Suddenlink Communications, however, the HD deficit was very real and required swift action to correct.

“If you go back to 2009, there was no doubt that satellite was really taking the upper hand around positioning themselves around HD,” Suddenlink executive vice president and chief operating officer Tom McMillin said. “Back then, we were hearing a lot that to stay competitive, to keep up with the Joneses, we need more HD content.”

That fall, Suddenlink launched Project Imagine, a threeyear plan to upgrade its networks and among other things provide room for up to 200 HD channels.

By the end of this year, Suddenlink expects to have effectively tripled the amount of HD it offers to more than 70 channels, up from 24 two years ago. At the end of the first quarter, the operator averaged 63 HD channels across its systems.

BASELINE: 100 HD NETS

At this point, a baseline of 100 HD channels has become what customers expect, said Melani Griffith, Insight Communications’ senior vice president of programming and video services.

“Having a significant number of HD channels is table stakes,” she said. “If you want a customer to switch over, certainly one of those factors is to have at least 100 HDs.”

Some providers believe having the most robust HD linear channel lineup is still important. AT&T, for one, claims the top tally of 176 HD channels in some U-verse TV markets is the biggest offering anywhere in the U.S.

“Having the most HDs is less about having a competitive advantage — although that certainly plays into it — than it is about delivering what the customers want,” AT&T senior vice president of content Rob Thun said.

AT&T charges $10 per month extra for HD, which Th un argued is a more “transparent” way to offer such a service. “I think our competition charges for HD in a different way … They ask for equipment fees or bury it in other charges,” he said.